Not-Held Order

What Is a Not-Held Order?

A not-held order, usually a market or limit order, gives a broker both time and price discretion to get the best price available. As a result, the broker is not held responsible for any potential losses or missed opportunities that result from their best efforts.

A not-held order may be contrasted with a held order, which instead requires prompt execution for an immediate fill.

Understanding Not-Held Orders

An investor placing a not-held order is trusting that the broker can obtain a better market price than what the investor can get by accessing the market directly on their own. Although the broker has price and time discretion, they are also not responsible for any losses that the shareholder may suffer from this type of order.

Providing the broker tries to obtain the best price for a with discretion order, they are "not held" liable for failing to execute a trade above or below an attached limit price. For example, a broker may have received a with discretion order to buy 1,000 shares of ABC with an upper limit of $16. They might think the market is about to fall and will not buy the stock when it is trading below $16. Instead, the market rallies and the broker now can’t execute the order below $16. As it was a with discretion order, the investor has little recourse or grounds to complain.

Not-held orders are most common when trading international equities. The opposite of a not-held order is a held order, which is the order that most investors are more familiar with, and one that demands immediate execution. In other words, the execution of the order remains held with the customer.

When to Use Not-Held Orders

Not-held orders are not typically required in liquid markets since there is ample activity for an investor to get in and out of a position with ease. When a market or security is illiquid or moving erratically, a not-held order may give the investor more peace of mind.

Types of Not-Held Orders

Benefits of Not-Held Orders

Brokers have the benefit of seeing order flows and trading patterns, which often gives them an edge when determining the best price and time to execute a customer’s order. For example, a broker may notice a recurring spike in volume on the buy-side of the order book that suggests a stock’s price is likely to continue rising. This would result in the broker executing a client’s not-held order sooner, rather than later. They may also have other customer orders that they can cross simultaneously.

Limitations of Not-Held Orders

Once the investor gives a not-held order to the broker, they are placing full confidence in that individual to execute the trade at the best possible price. The investor cannot dispute the trade execution, provided that the broker met all regulatory requirements. For instance, if a shareholder thinks the broker shouldn't have executed their not-held order before an FOMC interest rate announcement, they cannot seek a rebooking.